In response to the coronavirus (Covid-19) pandemic, we reviewed our work plans to delay or postpone activity not critical to protecting consumers and market integrity in the short term.
We are now able to provide the following updates on 4 key pieces:
- Assessing Suitability Review (ASR 2)
- Diagnostic review of business models
- Review of rules extending SME access to the Financial Ombudsman Service
- De-anchoring remedy for credit cards
Assessing Suitability Review (ASR 2)
Our second Assessing Suitability Review (ASR 2), looking at retirement income advice, was placed on hold in April 2020.
We have decided not to continue planned work on ASR 2 in 2021/22. This allows us to focus on other priority work, including defined benefit pension transfers work[1] and the issues raised in the 2020 consumer investments Call for Input[2].
We remain committed to ensuring firms give suitable advice, including retirement income advice, that leads to good consumer outcomes. We will continue to monitor the market, and where we identify concerns will consider whether additional work is needed.
Diagnostic review of business models
This work aimed to identify retail lending business models which benefit from consumers not repaying their debts.
Following initial successful testing and data gathering from firms, the work was postponed for much of last year.
In late 2020, we resumed the second stage of the work across various retail lending sectors. We identified indicators of business models that may benefit from consumers not repaying debts. The success of our analysis has meant we have embedded our methodology and findings into wider business model analysis, so that it is now integral to our oversight of relevant sectors. We are therefore not undertaking further work on this theme.
Review of rules extending SME access to Financial Ombudsman Service
Following PS18/21[3] we planned to start a post-implementation review of these rules. However, coronavirus has had a significant effect on small and medium-sized enterprises (SMEs) with the full impact remaining unknown.
We are therefore delaying the start of the review to allow us to include upcoming developments with SME complaints within the scope of our review. We will assess this position by April 2023.
We continue to engage with the Financial Ombudsman Service on its insights from current handling of SME complaints.
De-anchoring remedy for credit cards
In July 2018, we announced our intention[4] to consult on mandating removal of the minimum repayment anchor. This formed part of our efforts to limit the use of these credit products for longer-term borrowing, while maintaining their flexibility for millions of users.
We engaged stakeholders on our research findings, the practicalities of making an intervention and whether there would likely be counteracting effects or unintended consequences of a de-anchoring measure on consumers and/or firms. However, further work was put on hold due to the pandemic. This work remains on hold.
As set out in PS18/4[5], we intend to review the effectiveness of the credit card market study[6] remedies in 2022 after they have been fully implemented by firms and in operation for long enough to assess consumer outcomes.
Our planning for this post implementation review has begun. It will enable us to assess the effectiveness of the already implemented credit card market study remedies and changes in firm and customer behaviour since our behavioural research. The outcome of this work will indicate whether there is still a need for a de-anchoring remedy and whether this would address any new harms.